Despite the Russian invasion of Ukraine, the S&P500 ($SPX) actually ended up 0.8% last week after a massive rally on Thursday that spilled over into Friday. The index currently sits ~2% below the 200-day moving average and ~4% below the 50-day.
2022-02-27-SPX Trendline Analysis - Daily
The ADX signal continues to show a bearish trend in place, and has done so since the directional indicators crossed over January 4th.
The price/volume signal also shows a downtrend. Distribution days have come in pair since late January, so the selling hasn't been THAT bad. Rather, it seems like a lack of buyers has been the recent issue. Not surprisingly, the charts of leading companies remain an issue; very few are showing price patterns associated with accumulation.
2022-02-27- SPX Elliott Wave Analysis - Daily - Primary 3
Elliott Wave continues to show a downtrend. The potentially bullish count bit the dust last week, and both Bearish counts remain in play.
2022-02-27-SPX Elliott Wave Analysis - Daily - Primary 2 - Intermediate A/C
Some counts have suggested that last week’s low was the bottom (i.e. the entire ABC correction). I’m skeptical, but will trade based the price and volume action. Both bearish counts are invalidated if the SPX rises above 4450.
The situation in Ukraine went from bad to worse, as cooler heads did not prevail.
Something changed in the Russian calculus, where an actual invasion / occupation of Ukraine is beneficial. In response, U.S. and European countries imposed economic sanctions on Russia's financial and technology sectors, although oil and energy were not included (yet).
As of this weekend, certain Russian banks are set to be expelled from SWIFT, the highly secure global network used for global financial transactions.
The conflict is still in the early stages, and so far, the long-term impact to the U.S. markets appears to be limited. That said, the U.S. economy already faced significant challenges that aren't made any easier by the conflict.
The U.S. yield curve continues to flatten, as the bond traders come to grips with upcoming Fed rate hikes and higher levels of inflation. Watch for an inversion (long-term higher than short term), which would indicate lower expectations for future growth and has a good track record of being a leading indicator for recessions.
I'm reminded of a line from the movie "National Treasure": "Cooperation only lasts as long as the status quo is unchanged". Unfortunately, the status quo has changed. The longer this conflict drags on, the more former areas of cooperation are at risk.
Best To Your Week!
Charts provided courtesy of stockcharts.com.
Once a year, I review the market outlook signals as if they were a mechanical trading system, while pointing out issues and making adjustments. The goal is to give you to give you an example of how to analyze and continuously improve your own systems.
IMPORTANT DISCLOSURE INFORMATION
This material is for general communication and is provided for informational and/or educational purposes only. None of the content should be viewed as a suggestion that you take or refrain from taking any action nor as a recommendation for any specific investment product, strategy, or other such purpose. Certain information contained herein has been obtained from third-party sources believed to be reliable, but we cannot guarantee its accuracy or completeness.
To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisors of his/her choosing. Invest Safely, LLC is not a law firm, certified public accounting firm, or registered investment advisor and no portion of its content should be construed as legal, accounting, or investment advice.
The material is not to be construed as an offer or a recommendation to buy or sell a security nor is it to be construed as investment advice. Additionally, the material accessible through this website does not constitute a representation that the investments described herein are suitable or appropriate for any person.
Any referenced performance is “as calculated” using the referenced funds and has not been independently verified. This presentation does not discuss, directly or indirectly, the amount of the profits or losses, realized or unrealized, by any reader or contributor, from any specific funds or securities.
The author and/or any reader may have experienced materially different performance based upon various factors during the corresponding time periods. To the extent that any portion of the content reflects hypothetical results that were achieved by means of the retroactive application of a back-tested model, such results have inherent limitations, including:
Model results do not reflect the results of actual trading using assets, but were achieved by means of the retroactive application of the referenced models, certain aspects of which may have been designed with the benefit of hindsight
Back-tested performance may not reflect the impact that any material market or economic factors might have had on the use of a trading model if the model had been used during the period to actually manage assets
Actual investment results during the corresponding time periods may have been materially different from those portrayed in the model
Past performance may not be indicative of future results. Therefore, no one should assume that future performance will be profitable, or equal to any corresponding historical index.
The S&P 500 Composite Total Return Index (the "S&P") is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. Standard & Poor's chooses the member companies for the S&P based on market size, liquidity, and industry group representation. Included are the common stocks of industrial, financial, utility, and transportation companies. The S&P is not an index into which an investor can directly invest. The historical S&P performance results (and those of all other indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual in determining whether the performance of a specific portfolio or model meets, or continues to meet investment objective(s). The model and indices performance results do not reflect the impact of taxes.
Investing involves risk (even the “safe” kind)! Past performance does not guarantee or indicate future results. Different types of investments involve varying degrees of underlying risk. Therefore, do not assume that future performance of any specific investment or investment strategy be suitable for your portfolio or individual situation, will be profitable, equal any historical performance level(s), or prove successful (including the investments and/or investment strategies describe on this site).